I enjoy writing about consumer related numismatic topics that are seldom openly discussed. I'm fairly sure what follows fits that category.
Let's suppose you attended a country auction and among the bric-a-brac discovered a rare Canadian token. Not only is the piece rare as hen's teeth, the condition is extraordinary. All the other coins in the old tin are the typical common assortment brought home by a WWII solider. The token is so special and rare you want to wrap it in a tissue to protect it until it belongs to you. None of the other people in attendance has even looked at the coins! It's cold and raining, but it hardly matters. This is your lucky day!
Out of the corner of your eye you spot Coin Club Sharpie walking in your direction. After shaking your hand and asking what you are doing out on such a miserable day, he beings to paw through the coins. Like a magnet, the fingers of his right hand are attracted to the rare token. He looks up at you, smiles and gently returns the rarity to the lot.
While you're sipping cold coffee and leaning against a tree trunk in a futile attempt to stay dry, Sharpie again happens by. “No sense in us beating one another up over the thing,” says Sharpie, as he displays a folded $20 bill in the palm of his hand. “Tell you what I'm willing to do. I'll give you twenty bucks to pack it in and head for home. I'll take my chances with the crowd. You look like a half-drown rat. Tell me an easier way to make a quick twenty.”
You wipe your nose with the sleeve of your jacket and say, “I'll give you fifty to do the same thing.”
Sharpie suggests it's time to adjourn to his car for a short meeting. It's decided Sharpie will bid against the crowd. After he buys it, the rare token will be jointly owned. Then you and Sharpie will hold an independent auction. Whoever is willing to pay the most will get the token and the loser will receive half of the selling price. Perhaps this arrangement is in need of a little explaining? Because he has no serious competition, let's suppose Sharpie ends up buying the rare token and all the other coins in the lot for $20. Before starting your private auction, you hand Sharpie $10 which is your half of the purchase price. You are willing to pay $1000 for the rarity. Sharpie thinks about it for a while and then gives in. You own the prize and pay Sharpie $490 that being his profit for being part of the transaction.
Certainly things would have worked out better if Sharpie hadn't shown up, but by working together instead of competing you now own a wonderful rarity for a fraction of it's true value. Both you and Sharpie agree that this team effort should continue at the next auction.
To the best of my knowledge, such arrangements, even if they happen to be spontaneous are illegal. Like many illegal activities, auction pooling happens all the time and is difficult to prove-- assuming someone is willing to instigate litigation.
In some cases, many more participants may be members of the pool. Arrangements can become far more complicated than the simple example I've provided. I know of at least one New England antique dealer who does quite well for himself by staying away from auctions.
In my opinion, arrangements among bidders not to compete (pooling), is becoming quite prevalent during electronic auctions. This is especially true in specialized areas of the marketplace. For example, a rare South American plantation token may only be recognized as such by a few auction participants. Instead of fighting over the piece and benefiting the seller, those in the know might decide to form a pool that will potentially allow each member to profit after the item sells for a cheap price.
I would strongly suggest you avoid participating in any auction pooling activity. If for no other reason, put yourself in the seller's place.
I couldn't responsibly conclude this article without mentioning that experienced numismatic auctioneers are well aware of potential pooling activity and have taken precautions to see that such activity does not harm the seller. They know the value of what they are selling. This is probably not the case with all Internet sellers.